KMI Research reports the amount of cabled fiber installed per year worldwide will grow by a compound annual growth rate of 7.5% from 2004 to 2009.
Three countries: United States, China and Japan together will account for 69% of demand from 2005 through 2009. Underpinning this growth is the shift in investment in developed countries towards local loop infrastructure to offer broadband services. China and other developing countries continue to build out long-distance networks. These data are from the latest edition of KMI's annual "Worldwide Optical Fiber and Cable" market report.
The 7.5% CAGR is revised upwards from KMI's view one year ago, due to stronger-than-expected demand in North America. Whereas the late 1990s investment in U.S. long-distance networks was speculative, the fiber-related investment in the local loop is tied to increased demand for broadband services and is supported by last year's FCC and Supreme Court decisions to protect incumbent carriers' investment in fiber-to-the-home (FTTH.). In the U.S., Verizon contributed to a 61% increase in the amount of cabled singlemode fiber installed in 2004. As a single customer, Verizon accounted for approximately 30% of the U.S.'s 2004 cabled-fiber demand.
Verizon's shift in investment to FTTH is cause for optimism. Although both Verizon and SBC installed fiber closer to the customer in the late 1990s to offer DSL, the U.S. is really only beginning FTTH construction. Japan, on the other hand, began FTTH construction in the mid-1990s as part of a government initiative, which also helped buoy the industry through the recent downturn. NTT, Japan's incumbent local and long-distance carrier, has achieved 80% coverage in its optical access network. The optical access network only refers to feeder fiber installed from the central office to the demarcation point between underground and aerial infrastructure, and doesn't include the distribution and drop cables that connect to customers' homes.
As demand increases, factors relating to the last fiber boom still need to be resolved. There continues to be excess fiber capacity in the market. Draka Comteq acquired the majority position in Alcatel's fiber and cable businesses in mid-2004, and Pirelli announced that its fiber and cable facilities were up for sale. But so far, such restructuring has not resulted in significant capacity reductions.
On a positive note, the over capacity now has less effect on the market for optical fiber cable than in previous years. Cables in FTTH networks have a lower average number of fibers; for example, drop cables that connect customers' homes to the network usually have only one fiber. The shift towards FTTH in the U.S. and related investment by other developed countries therefore contributes to a 2% market increase for optical fiber cable from 2004 through 2009.
KMI Research, a unit of PennWell Corp., is based in Nashua, NH. For more information visit www.kmiresearch.com.